Reality Check: Opportunities and challenges for mobile virtual network operators

Editor’s Note: Welcome to our weekly Reality Check column. We’ve gathered a group of visionaries and veterans in the mobile industry to give their insights into the marketplace.
What do the Virgin Group, Poste Italiane, and Wal-Mart have in common? They are all mobile virtual network operators (MVNOs).
An MVNO is a company that may not – usually does not – own part of the communications spectrum or even a network infrastructure, but applies its brand value and customer management capabilities to create a wireless company. As a “virtual” provider, the enterprise leases minutes of use from a traditional mobile operator for sale to its own customers. Becoming an MVNO gives each of these companies an opportunity to expand their sales channels by delivering unique services and content to customers via a branded mobile device.
If conceived launched and operated efficiently, an MVNO can open up new streams of revenue and turn a healthy profit. Research firm Informa Telecoms & Media claims that there are approximately 85 million subscriptions on MVNOs or resellers globally, and revenues of MVNOs are projected to rise to $80 billion by 2012. However, the downside risks of the MVNO marketplace are serious, and some companies underestimate the scope of the effort. The challenges can be overcome, but success involves skills, resources and operational systems that are not necessarily within the core competencies of some of the players joining the virtual wireless game.
Each company pursuing MVNO initiatives faces different challenges and some appear to have built-in advantages. A communications company, for example, already possesses many of the operational systems required for success. Nevertheless, every player must overcome a similar series of obstacles to achieve high performance with an MVNO strategy.
Getting the value proposition right
Setting up a clear MVNO business case, focus and value proposition is harder than it appears. Many companies get fairly far down the planning path before realizing that there is no general consensus about what the value proposition might be. And if a company does not know what the product is going to do or who it will appeal to, it will launch without a clear and compelling reason for a customer to make the switch and buy its service. The MVNO marketplace is not one where a product or service should be tested haphazardly. The MVNOs that come out of the gate compromising on quality will not do as well as those that execute meticulously.
Managing the launch successfully
Companies from different industries entering the MVNO market will have different core competencies, and some will be better positioned than others to excel in key areas. Wal-Mart, for example, has a warehouse and distribution system, as well as retail space, for handling many of the operational requirements for success. In that regard, it may have advantages over a company that has a less significant retail presence. On the other hand, Poste Italiane, Italy’s national post office, which operates an MVNO called Poste Mobile, which has a very effective sales and distribution network, thanks to 14,000 post offices located around Italy, may excel at some of the things that could challenge Wal-Mart.
Overall, however, every MVNO is challenged by the program management office aspects of a launch – tying together and coordinating all the activities that must be planned, tracked and measured. MVNO success is built in part on effective management of third parties, an activity that taxes even veterans at the management of complex operations. High performers tend to have a more rigorous, disciplined decision-making environment than do average and low performers. As applied to program management, this characteristic increases the likelihood of a successful launch.
Deal making is another activity on the critical path. MVNOs that do not negotiate the right deal from a carrier start out in a hole from which they may never emerge. On the other hand, if they elect to outsource or use a shared services approach to their back-office systems, the best deal is important there, as well, or it may be impossible to turn a profit quickly enough to survive.
Developing the enabling operational systems
Getting the back office systems in place – billing, customer care, network interface, the service delivery platform – are so important for MVNO success that they can make or break a deal. Some carriers have walked away from the negotiating table with prominent companies after many months of due diligence. They realized that, although they might have had a robust OSS/BSS platform in place for their own subscribers, it would take them as long as two years – and a budget two to three times that for the entire MVNO launch – to fine-tune the system for the intricacies and demands of being a virtual wireless operator.
Achieving excellence in back office capabilities is vital to overall success. Companies must focus carefully on customer relationship management processes and systems to support MVNO operations. By increasing self-service utilization through web-based self- care and decreasing average call handling time – and by improving overall customer satisfaction – the MVNO will realize significant savings in operational costs.
Outsourcing the OSS/BSS components of a total solution is an increasingly attractive option for MVNOs, as well. If executed correctly, outsourcing results in higher service quality – thanks to ongoing service level agreements – and also ensures that experts in these various functional domains assume the responsibilities and risks of technology change. This is especially true considering that an external service provider, a mobile virtual network enabler (or MVNE); can achieve better economies of scale in the cost-intensive hardware and software infrastructure needed to establish OSS/BSS functions. MVNEs can typically also achieve better economies of scope as well, focusing on developing the proper IT and network competences and skills.
On the road to high performance
Retailers, media, entertainment, banks and communications companies view the MVNO marketplace as an opportunity to expand sales channels – and increase cross-selling and up-selling success to an existing or new customer base – by delivering unique services and content directly to customers via a branded mobile device. The opportunity beckons to retailers, media and entertainment companies because they can leverage their existing assets, such as content or distribution channels, and increase the likelihood that the mobile virtual network operator model will be profitable. Likewise, the opportunity appeals to wireline and cable companies as a way to leverage existing subscriber bases and add a wireless component to their service portfolios. MVNOs should be seen as an additional channel to deliver existing products and services to an existing customer base, or to increase the loyalty of the clients through better reach and user experience, rather than an opportunity as a standalone business. Shaping a unique value proposition based on the existing portfolio of products and services, and leveraging complementary products and services, are key success factors.
Yet retailers and entertainment companies do not become communications providers overnight. And communications companies do not start appealing to new generations of customers overnight. Whatever the industry, planning, launching and operating an MVNO requires a company to find and coordinate the best thinking and best operational capabilities available. Many will be called to high performance in the MVNO marketplace, but fewer will be chosen.
Carlo Gessi is a senior executive at Accenture Mobility Operated Services.